Annual Review Debate

Thank you, Mr Chair. I was so eager to get up, as the chairperson of the Finance and Expenditure Committee, to speak about the annual reviews that we undertook.

Before I start with that, I would very much like to thank the staff who do these report backs to Parliament, which can be found in this volume. They do a great job, and if anybody is spending their Tuesday afternoon watching the House, then I would very much recommend—if you’re ever interested in what any different agency does—that you go and have a look at the select committee’s annual report back on them.

Chlöe Swarbrick: Great read.

“Great read”, we’re hearing—they are, they are.

So there were a number of entities that we did a very quick report back on. There were no matters to bring to the attention of the House for Kiwi Group Holdings Ltd, Ōtākaro Ltd, Southern Response Earthquake Services Ltd, and the Government Superannuation Fund Authority. But we did have hearings and reported on the Guardians of New Zealand Superannuation, Inland Revenue Department, New Zealand Green Investment Finance Ltd, New Zealand Infrastructure Commission, New Zealand Productivity Commission, Office of the Controller and Auditor-General, Pike River Recovery, Reserve Bank of New Zealand, and Treasury. And, of course, we did the Financial Statements of the Government of New Zealand for the Year Ended 30 June 2022—that is different from the sector reports and found at the front of the volume.

I’m going to focus on the Treasury review and some themes that came through throughout all of our reviews. For me, one of them that was brought to our attention was the issue of improving accountability and transparency of public finances, and particularly with the issue that the Public Finance Act focuses on vertical as opposed to horizontal reporting. I will go briefly to the Treasury, who commented on this when we were asking questions about it. And we were asking particular questions because the Auditor-General has raised this in a number of different reports.

So the current legislative arrangements in the system are focused on reporting at an appropriation level. The Secretary to the Treasury explained that it would be useful to enable reporting initiatives that span multiple appropriations, involving different agencies working together, or initiatives at a sub-appropriation level. We heard that this is a complex challenge because the Treasury is operating in a system where the legislative foundations, IT systems, and capabilities across agencies are not structured consistently. Despite this, we heard that the Treasury is always looking to improve the quality and information within the public finance system to create stronger accountability and transparency.

I’ll pause here to note that the committee remains interested in this topic, and that we’ve also—separately to this annual review process—heard from both the Auditor-General and the Parliamentary Commissioner for the Environment, which, probably, you wouldn’t necessarily expect the Finance and Expenditure Committee to be talking to.

We also, of course, heard about how this topic of accountability and transparency does relate to the Wellbeing Budget and how that’s worked through, the Living Standards Framework, and He Ara Waiora. Also related to this transparency theme, there was discussion around the COVID-19 Response and Recovery Fund, and we heard that lessons had been learnt from that and that those are now being applied to the Climate Emergency Response Fund.

Treasury also noted that the clusters that we have now in justice and natural resources now have quarterly reporting, and there’s work on how to make those programmes work as well as they can. Some other themes included the liability for entitlements under the Holidays Act 2003, and we heard that both Treasury and the Auditor-General are committed to assisting with this issue. Other issues that were traversed, or themes that reoccurred throughout reports, were the tax revenue increasing, and also issues around workforce—specifically within the different agencies having turnover issues but also for the country as a whole. And some of that, of course, relates to productivity, which was another theme. We also heard about inflation a number of times.

I’ll skip now to cyclone and storm recovery. Of course, this is outside of the period that we were discussing, but we did still have very good interactions with the Minister for Cyclone Recovery, with Treasury, and with other officials about the impacts of those events on both our economy and, of course, those communities involved. Thank you.

The context in which we reviewed the Government’s finances was a year in which New Zealand is experiencing extremely high levels of inflation, which have now persisted for 21 months. This sustained period of high inflation has led to a cost of living crisis and an extremely rapid rise in interest rates, which is affecting New Zealanders, mortgage holders, and businesses across the economy.

In that context, I think there has been discussion from both sides of politics about the need for spending by the Crown to be disciplined. I note the Minister of Finance has repeatedly committed that the Government would be moving to reduce the volume of Government spending following a very significant level of fiscal stimulus during COVID lockdown years.

However, in reviewing the Government finances, it is really clear that, in fact, Government spending continued to increase in the 2022-23 year, hitting an all-time high of $129 billion a year. So my first question to the Minister of Finance is simply: when will Government spending come down?

I thank the member for her contribution and also acknowledge the chair of Finance and Expenditure Committee, and other members of the committee for the work that they’ve done.

The member who asked the question will be well aware that in the statements we’ve been looking at and the forecasts going ahead in them, our Government spending as a percentage of GDP trends down over the forecast period and ends up at around about the long-run average of 30 percent.

Clearly the period of time, in particular the financial statements that end on 30 June 2022 that are the focus of this particular hearing, covered a period in which there was significant expenditure on behalf of the Crown. For the record, for one of many, many times that I’ve said it, I stand by the fact that New Zealand needed to move hard and early against COVID-19; I stand by the fact that we made our priorities cash flow and confidence. Many times over the course of the last few years, I have met New Zealanders who were in receipt of the support of the Government through COVID-19, from businesses through to individuals who credit the fact that they got that support for their business still being able to operate or for the fact that their friends and family are still with us today.

I accept that the Government has had to spend more in recent times than we might have otherwise. I would note that is a relatively similar percentage, as a percentage of GDP, to that which previous Governments have spent in the wake of, for example, the Canterbury earthquakes or the global financial crisis. It is a reality that when a rainy day arrives, the Government comes along and puts up the umbrella; that is the purpose of the way in which Governments work, but clearly the Government has a plan to see Government spending reduce. Not only is that reflected in the percentages of GDP but it is also reflected in the commentary within recent work by both the Reserve Bank and the Treasury that indicate that, actually, the Government’s fiscal stance is a contractionary one, and so going forward from here we will be reducing that spending, whilst always keeping a balance to make sure that we do look after people with the spending that we do.

None the less, the reality is that, in the period under review, Government spending had increased significantly, up from $108 billion in the 2020-21 year, to $126 billion in the 2021-22 year. Now, this comes also in the context of increasing Government expenditure for every year this administration has been in power, such that New Zealand will be spending $1 billion more every week compared to when the Government came to office.

So, against that backdrop, I want to turn now to the concerns of the Controller and Auditor-General, and the Minister of Finance will recall that in this same debate a year ago I put to you the serious concerns that the Auditor-General had raised about the quality of information and reporting about the sheer volume of Government expenditure. He noted, for example, that with the cost of living payment, the significant “impact of prioritising speed and expediency over accuracy and quality.” The Minister will recall that payment ended up seeing that millions of dollars went to well-paid New Zealanders overseas and, again, millions of dollars went to households with very high incomes.

But the Auditor-General has again stated—and I think that these concerns have become more and more elevated—that he is simply “not getting the information that allows us to understand the performance of the Government at multiple levels or that enables Parliament and the public to hold Government to account for that performance.” My concern is simple; it is, when we have such a huge increase in Government spending, such that New Zealanders are being taxed at a higher rate than ever, fuelling very elevated levels of spending relative to the size of our economy, what has the Minister of Finance done to ensure that New Zealanders are getting performance and good outcomes from that spending? We need a little bit more than the wellbeing framework. As a relatively senior public servant raised with me the other day, the wellbeing framework—yes, it relates to which Budget bids might come through the Treasury process, but there is almost nothing done to then report on which of those initiatives actually had medium to long term impact that measured up with what was promised in the first place.

It has been a theme of this Government that there are big promises made—whether it’s about mental health or KiwiBuild—and the spending fires out the door but we don’t see the delivery at the other end.

So two points there for the Minister of Finance to address. First, have you done anything about the Auditor-General’s increasing alarm—and I note in particular the letter written to the Finance and Expenditure Committee in November last year, raising and escalating these concerns yet again. What’s the Government doing about it? And second, how can New Zealanders be confident that we are getting value for every dollar the Government takes from their back pocket?

I thank the member for raising this matter and, as the committee is aware, and the Auditor-General and Treasury are very well aware, there are ongoing conversations about this. I share many of both the member’s concerns and the Auditor-General’s concerns about the way in which parliamentarians and the general public get the information that they need about programme- and project-level spending within the Government system. I’m conscious of the time so I won’t go too far back into history, but the reforms that were made that created the Public Finance Act did create the appropriation structure, which is, in fact, what’s guiding the very debate that we’re having. That appropriation structure, by design, aggregates up, and the Treasury in particular operates at that aggregated level.

It is clear that over recent times, all of us are frustrated that perhaps we don’t get as much information as we should beneath that aggregated level. The actual exercise of annual reviews and estimates is the opportunity for Parliament—through the select committees, supported by the Auditor-General—to actually go through at a much more granular level what’s happening and undertake that deeper examination. So that would be my first response, and I continue to believe that is an important role for select committees, and one that I know the Auditor-General supports—and one where there could be changes and enhancements, where, in fact, select committees decide rather than looking across the Vote to actually look very specifically at programmes or projects within the Vote as their focus for a particular annual review or estimates process.

I think that would be important. It would require—and I’m not having a go at the Opposition because we certainly did this when we were in Opposition as well—quite a different approach to the actual hearings because they tend to be a bit more political theatre than they do substantive examination. But there could be a way that, you know, both could be created within it. So on that point, I think there is some work to do.

To specifically answer the member’s question about what’s happened, the Treasury’s been working closely with the Office of the Auditor-General around the concerns about transparency and traceability of performance reporting provided to Parliament. A number of initiatives have been undertaken. Firstly, we do produce a wellbeing report; this is to partly answer the second part of the member’s question about how the wellbeing budgeting process can support better examination of the success of our work. Obviously during this period of time we had the COVID Response and Recovery Fund, and specifically in response to that we have now much more regular and more detailed reporting of expenditure within that fund, below the broad appropriation level. That is a big change; it’s required and it’s highlighted the system changes that are required to be able to draw that information out from agencies and put it up so that it can be understood.

Also, with respect to COVID, I highlighted another issue which we have to resolve—and I believe is resolvable—but, for example, some of what we funded in COVID, for example providing devices to schoolchildren when schools were closed during COVID, actually added to an existing appropriation. So disaggregating out the COVID bit of that funding from the rest of that funding was quite challenging. So that’s the kind of thing that we have been continuing to work on.

We are now working with the Office of the Auditor-General on developing options for improving the content of Estimates to make sure that, within the structures that we’ve got, we are getting better information. As I say, that could lead to, I think, far better discussions at select committee. We are looking through key initiatives for Budget 2023 to provide better performance indicators alongside those. That is something, of course, that’s driven by agencies so we have to get alongside the agencies, but we are looking to do that, particularly for key initiatives in Budget 2023. We have started to scope options for approving reporting below appropriation level, including benefits, costs, and implementation requirements of such options. As I said, we’ve already made the changes around the COVID Response and Recovery Fund, and we’re looking to see how we can take that and use that in other similar types of funds. As I say, we’ve already published that reporting on the COVID fund.

I have continued to reinforce with my colleagues the importance of their work in, alongside their agencies, being transparent—providing information about implementation, monitoring, evaluation, and performance reporting, and they are well aware of that. I continue to work on things like the cluster approach and so on, which focuses much more on outcomes than it does on the individual agencies and the work that they’ve done. We will continue to work with the Office of Auditor-General.

I also would note, at this point, the role of the Parliamentary Commissioner for the Environment and the work that he has been doing in this space. I would say the Parliamentary Commissioner for the Environment has been doing some excellent work in this space around environmental reporting and understanding the extent to which we know what we’re getting in that space. That very specifically relates to the member’s second question around how we know more about what wellbeing does. Again, I agree with her, it’s a new thing. We’ve brought it in; we are obliged to be able to report on it. We report on that through the wellbeing report, but what the Parliamentary Commissioner for the Environment has highlighted is that we can drill down into what were called the Four Capitals, to be able to say a lot more about what we’re investing in there and what we’re getting for that. He’s provided some very constructive suggestions in that regard, which we’re working on.

Then finally, in answer to the second of the member’s questions, I would refer her to the detail of the wellbeing report that Treasury have published. It actually does give some really interesting information and links up across the indicators that we use within the Living Standards Framework for whether the things that we’re doing are contributing to overall wellbeing. We can continue to refine that report—I think we should—but we have made a start on all of the matters that the member’s raised.

Thank you, Mr Chair. I’d like to take the Minister up on an answer he gave earlier where he said that Government spending as a share of the economy, as a percentage of GDP, is high now—it’s about 35 percent in this forecast period—but it will return to the long-term average of around 30. And I’d like to challenge that because, while it was high after the Canterbury earthquakes, for the five years or so pre-COVID, it was actually 27 or 28 percent of GDP. Now 35, it’s going to be 32 next year and there’s no COVID, and it’s going to be 31 in 2027 when COVID, we hope, is a distant memory.

So I question the Minister’s claim that he is going to return spending to normal levels. He seems to have established it at disaster levels on a permanent basis, several percentage points of GDP higher than what it is in good times normally. And I want to ask where some of that money is going because I’ve drilled down into some of the reports, and this report that we’re talking about. I look at healthcare expenses: pre-COVID, 2019, $18 billion spent on healthcare in 2019. During the height of COVID, $27.8 billion. Next year, 2023, the year after we’re debating, it’s going to be $28.8 billion. Now, at what point do we stop blaming COVID, and how do you increase healthcare expenditure by $10 billion, and yet the waiting lists get longer, the nurses and doctors get more dissatisfied. I wonder if the Minister doesn’t think it may have been a mistake to try and restructure the healthcare system in the middle of a pandemic.

I also want to ask the same question about education. Again, pre-COVID, it was about $14 billion a year. Then we get to 2023, up to $18.7 billion. So, you know, they’ve put up—well, maths is not strong in this country thanks to education, but they put up expenditure by 30 percent in a few years. That can’t all be for buying laptops for kids in COVID. And yet somehow we have teachers on strike, attendance rates dropping, parents noticed that this month, due to the strange kaleidoscope of holidays, kids are barely going to school in April, and yet somehow the Minister has managed to put another $4 billion in.

So I ask the Minister of Finance: you say that you’re returning spending to normal levels—I don’t think that’s true. I think normal levels are 28, 29 percent of GDP, you’re getting it down to 31 in five years if you’re lucky. And I wonder where all that extra money goes, because a percent of GDP is a lot of money, $10 billion extra on healthcare is a lot of money, four billion extra on education is a lot of money. And I don’t think New Zealanders mind paying taxes if they’re getting value for money. But how do you show that you’re getting value for money for these billions of additional taxes that you’re taking from people? How can people be sure that it’s money well spent when they look at health and education today?

Well, obviously the percentage numbers are the percentage numbers. I understand the point that the member’s making that 31 is higher than 27—30 is higher than 27. My point would be that the long-run average for New Zealand is around 30 percent. I happen to believe that when we were down at those levels of 26, 27 percent, which we were at times under the previous National Government, that is the reason why our health system found itself in trouble, because we weren’t putting adequate resources into some of those areas.

So while I absolutely support and commit to reducing the level of Government spending down, two things: firstly, I’m not going to do it on a dime, because that is the kind of austerity approach that has caused significant issues in other countries around the world. We are reducing it down in a responsible manner while still supporting the provision of the public services that New Zealanders need and deserve.

Secondly, I would say to the member that, yeah, if we were to get it down to the levels that I know the member prefers, I believe that ultimately means that we can’t run the kinds of public services that we need. So it’s a fine balance. We’ve always got to be looking for ways in which we can be more effective, more efficient with our spending. But the fact that we’ve increased health spending is a result of the fact that we are coming from way behind when it comes to where our health system was when we came into Government, and, you know, the kinds of expenditure we put in place has allowed us to employ significantly more nurses, has allowed us to employ significantly more doctors. It means that there are significantly more people getting mental health consultations in primary care—

💬 Andrew Bayly: Oh, cut it out.

Well, they are, Mr Bayly—getting more consultations in primary care. It’s the reason why we can invest in paying teachers more when it comes to the education budget that the Minister has raised. So these things do cost money, making sure that we provide the quality of services that New Zealanders need is important to me, but we will strike a balance. We will continue to see the emergency COVID expenditure come out of our Budget, and we will be closer to that long-run average of 30 percent of GDP. But I’m not going to do it in a way that has the hallmarks of austerity and all of the collateral social damage that causes.

Does the Minister accept what the Reserve Bank Governor has said: “Monetary policy needs friends.”? So, yes, there might be collateral damage if he was to reduce expenditure, but the Reserve Bank having to put up people’s mortgages because he keeps spending is doing exactly the same thing. Does he accept the complementarity between the monetary policy of the Reserve Bank and the policy that he has in place?

On a technical note, the Minister is trying to claim the long-run average of New Zealand’s Government expenditure is 30 percent. That may be true if he counts the bad times—if he counts the global financial crisis, if he counts the Canterbury earthquakes, if he counts the COVID period. However, what is the long-run average in good times, and when do we get back to that? I don’t think it’s 30 percent. He’s being cute with an average. We don’t want to get back to the average; we want to get back to the level of Government spending that we have when there’s not a crisis on, and that is closer to 27 or 28 percent, not 30 percent and certainly not 31, 32, or 35. This Government is spending too much, and he can’t say what we’re getting back in return. He said we’re getting more mental health sessions—is he for real? He said teachers are happy they’re being paid more. Really? Nurses? I mean, if I was in Government, I don’t think I’d bring up those things right now.

But I want to bring up something the Minister said about COVID. He said it was the cost of COVID and everybody is happy that they got given money by the Government—of course they are. Does the Minister know anyone who’s not happy to be given money for free? The question is: was it necessary to spend that money? Yes, it was. Why? Because the Government shut them down. My question is: does he believe, as the Minister of Finance, that New Zealand made the right choices? For example, there was a long period through the end of 2021, the start of 2022, when the borders were shut, people had to go on the misery of human lottery and try and get a managed isolation and quarantine (MIQ) space, and yet if a person actually had COVID, they were allowed to isolate at home. So if you had a negative test overseas and flew to New Zealand, you had to go into MIQ—if you could get a space—but people that were testing positive and actually had it, they could isolate at home; just not people returning home. There was a period where people could use rapid antigen tests but the Government actively banned them and then it confiscated them off the people that had imported them. All of this is in the period that the select committee is reporting on, from the 2021-22 financial statements.

I just wonder if the Minister doesn’t think if only we had ordered the vaccines a little earlier and got the roll-out done, if we’d asked GPs and pharmacies to be part of it earlier, if we’d been able to not lock Auckland down for three months at the end of 2021, then perhaps not so much expenditure would’ve been necessary.

So we accept what the Minister says, given the Government shut the country down, shut the border, made Aucklanders stay home, banned us from going to Whangārei—at one point, the Prime Minister of New Zealand even said, “You can go round to your neighbour’s house and sit in the garden, but you’re not allowed to use their toilet.” I mean, it’s difficult to take yourself back there, but that’s where we were. Does the Minister think that perhaps, maybe, if it wasn’t for the Government’s overly stringent and ineffective management of COVID, which had very little health benefit, then maybe he wouldn’t have had to borrow and spend so much money and maybe there wouldn’t be so much inflation, there wouldn’t be so much debt—

Chlöe Swarbrick: Maybe more people would be dead.

—and maybe New Zealanders would be in a much better space. Chlöe Swarbrick says, “Maybe more people would be dead.” Well, Chlöe Swarbrick, answer this—

💬 Hon Julie Anne Genter: It’s not “maybe”; it’s a fact.

Oh, I’m very sorry, I don’t have eyes in the back of my head. So Julie Anne Genter is heckling here—Julie Anne Genter, tell me: how would it have helped to make people stay out—

CHAIRPERSON (Greg O’Connor): Mr Seymour, could you direct your questions towards the Minister, please.

Yeah, no, fair enough—fair enough.

CHAIRPERSON (Greg O’Connor): It’s good to have a conversation down the back, but we’d like to be part of it.

Yeah, no, that’s OK, Mr Chair. I was bluffing—she doesn’t know the answer anyway.

But I leave the question to the Minister: does he believe that the Government’s COVID response—its lockdowns, its slow vaccine roll-out, its ban on rapid antigen tests, its insistence on MIQ when people with COVID could isolate at home, its Auckland lockdown. Does he really think that all of those things were justified as the reason why he’s had to borrow so much money and people now face so much inflation? Because all those people seeing their interest rates going up because he’s spending so much, all those people seeing their prices go up, all those people watching job losses starting to mount, they might be forgiven for asking themselves, “Maybe the Minister’s right that he had to borrow so much money because the Government policies locked down businesses, but was it right that the Government policy locked down those businesses, or are there possibly ways that we could’ve kept safe in a much smarter way and not be so indebted and inflated now?”

In answer to the first of the questions that the member put to me around the question of monetary and fiscal policy needing to be friends, absolutely agree with that. I point the member to statements both within the Budget Economic and Fiscal Update and statements made in Monetary Policy Statements by the Reserve Bank that they see the Government’s stance as supportive of them. We have a contractionary fiscal stance outlined in the financial statements that are the subject of this debate; that has been recognised. I can’t recall verbatim, but bits of the Reserve Bank Governor’s evidence that he gave in front of the Finance and Expenditure Committee where he was asked this direct question—he said that fiscal and monetary policy were working together, as they did during COVID, I might say, but also as they are doing now. So I do believe, by actions that we have taken, the results that are in front of us, and statements that others have made, that we continue to understand both the differences between monetary and fiscal policy and the fact that they are and should be friends.

In answer to the second set of comments, questions, that the member put to me around COVID, can I say once again I am extremely proud of the record of this Government through the COVID-19 pandemic. Around the world, we saw countries where thousands and thousands of people were dying, where they were needing to put up emergency morgues all around. I can recall talking to friends and relatives in the United States, one of whom was staring out their window at the temporary morgue set up in the car park where thousands of people were going because they were dying. Mr Seymour, what we did saved tens of thousands of lives. You might not think that’s important, Mr Seymour; I do.

Alongside that, we know that the actions that we took also saved thousands of businesses, Mr Seymour, and I’m interested to see now that the National Party has joined with the ACT Party in deciding that it’s all, in hindsight, wrong, that we shouldn’t have put the money and the resources. Mr Bayly used to ask me to put more money in to make sure that we did more for businesses in the COVID period. I am proud of what we did. It saved lives; it saved livelihoods.

It was also a pandemic where every Government in the world was operating without a playbook, where we went into this not knowing what was going to happen. So was every single decision that we took at every moment perfect? No, it wasn’t, Mr Seymour, but, in total, did it save thousands of lives? Yes, it did. And did it save businesses? Yes, it did, Mr Seymour.

Mr Seymour, I think it’s interesting today that you’ve taken the stance that you have here, and I’m going to offer you something, Mr Seymour, because it was extremely hard governing through COVID. I think if you talk to any leader in the world, the kinds of life and death decisions that needed to be made, the kind of support that needed to be provided, the kind of understanding to predict the future when we didn’t have the modelling, all of that was extremely challenging work. I wonder whether Mr Seymour might want to reflect on the comments that he has made today, or have been reported today, where he described Jacinda Ardern as being too dumb to be the Prime Minister. That’s the kind of man you are, Mr Seymour, and I don’t want to give you any more airtime.

A point of order, Mr Chairperson. I’d just like to first of all point out that Grant Robertson’s imputation that we don’t care if people die is not found anywhere in anything I said; in fact, the opposite. Second of all, while—

CHAIRPERSON (Greg O’Connor): Well, Mr Seymour, that will be a matter for those listening to make up their minds. Secondly?

Second of all, I actually said that she was too dumb to participate in a global conspiracy, and it’s wrong for the finance Minister to mislead people about my comments.

That’s not a point of order.

Mr Chair, if I may bring this debate back to the annual reviews. So we, of course, are looking at matters of monetary and fiscal policy here. For those who are following along at home, what we are talking about when we talk about monetary policy is, of course, of the refrain of the Reserve Bank, our central bank which, primarily, has the ability to use the leverage of the official cash rate (OCR). But, as we saw, and as has been discussed plentifully throughout this debate this afternoon, there has also been substantive utilisation of what is called unconventional monetary policy, particularly large-scale asset purchases and funding for lending. As the Minister himself was just outlining, he believes that this worked kind of hand in glove, or at the very least collaboratively, with what is called fiscal policy—that is, what the Government does: that is, taxing and spending, something that Governments of all stripes, by the way, undertake.

So as we’ve heard from members of the Opposition, obviously what we’re facing at present is inflation—quite high inflation. And we’re hearing from members of the Opposition that that inflation is apparently hitting everybody equally. They are characterising this as a cost of living crisis. However, if we dig in to these annual reviews—and members of the public, if they would like to, can go on to Parliament’s website and look it up themselves—what we see is that inflation is not in fact hitting everybody equally. And that’s because, of course, the baseline fact, Mr Bayly, is that those who are on lower incomes have to spend more of that income on essentials and therefore are paying those higher costs disproportionately. We also see, as reflected here, that in fact throughout the 2021 to 2022 period, the corporate tax revenue increased by 26.2 percent—that is, to a tune of $4.1 billion. That means that economic activity as benefiting those companies was of course in a fortuitous direction. However, as we also see reflected in that same annual review, household debt levels are trending upwards.

And here I would like to reflect on the sentiments that the Minister himself stated at committee, but also as reflected in the annual review, that of course there is an inherent relationship here with Government spending and Government debt levels. To that effect, he himself drew attention to the fact that there are three groups who are facing particular financial pressure at the moment. Those, firstly, who purchased homes in 2021, 2022; secondly, those who are refixing their mortgages at higher interest rates; and, thirdly, those on low incomes.

I just really want to go to that point of those on low incomes in that third group, because, as also is reflected in this annual review, we can see that debt levels for beneficiaries are in excess of $2 billion—at historic levels. The Minister said at that review hearing that he would need to do more analysis on the matter by examining beneficiary debt within the 2021-2022 financial year. That’s at page 6 of these annual reviews. So a question for the Minister in a minute, when he responds to this call—because the Greens only have five minutes in this debate—is whether he has done that analysis on beneficiary debt and the impact of Government fiscal policy decisions particularly, and not potentially supporting lower-income New Zealanders as much as they perhaps should have been.

The second part that I’d really like to highlight here is that while not necessarily inherently contained within the annual reviews debate, it was of course raised at the Monetary Policy Statement hearing with the Reserve Bank, where the Governor said in response to my questions that the Reserve Bank was undertaking or in fact seeking to engineer a recession. Now, while we’ve been talking about how the impacts of, particularly, the disproportionate overreliance on unconventional monetary policy has resulted in deepening inequality in this country—which is not a natural phenomena; it is a political decision because of the way that it works hand-in-glove with fiscal policy—what we are also seeing here is the Reserve Bank, in utilising monetary policy, particularly the OCR, go about manufacturing this recession. We know that recessions disproportionately also impact lowest-income New Zealanders. So to that question, I really would like the Minister to answer how he seeks to support lowest-income New Zealanders who are hit hardest and worst by that COVID economic response, which, notably, we tried for over a year to try and get a Finance and Expenditure Committee inquiry into—it was blocked by Labour majority. But now, none the less, the Government is progressing with it.

But also, secondly, how is it that he will go about supporting and preventing lowest-income New Zealanders from disproportionately bearing the brunt of the harm that comes with those recessionary headwinds?

I thank the member for using her time well during that question. In answer to the very specific question of debt, there is a Government programme of work on that. We haven’t completed it, but there is a programme of work around, particularly, the debt held by beneficiaries to the Government so that we can understand that more. I’m not leading that work, but it is under way but not completed—to the member’s specific question.

In terms, more broadly—it’s material we have covered a few times, but there is a reason why the Government has invested significantly in lifting the incomes of those on main benefits, those receiving Working for Families, those who receive superannuation, students, and so on. It is because we do recognise that there’s been a very significant impact there. That’s why we increased benefits in 2020, 2021, and 2022. I respect the fact that the member has a view around the scale of that, but it is a recognition from us that actually, yes, during a time of crisis like this, it is certainly true that fiscal policy should be used to support those on the lowest incomes.

With respect to the member’s second question, I’m not responsible for the comments of the Reserve Bank Governor. The perspective I have on that is it is the Reserve Bank’s job to reduce inflation back down to the target band of 1 to 3 percent. They have a tool which they use to do that, the official cash rate, and that is the tool that they have and that they have utilised. So it is their job in that sense, when they see what they determine to be an overheated economy, that they act in the way that they do.

My perspective is that fiscal policy, as I’ve noted before to Mr Seymour, needs to be friends with monetary policy, but also acts sometimes to be able to target our support to those people who need it the most. And so while I understand the member was there in the exchange that occurred, I’m clear on what I believe to be the Reserve Bank’s job. They are doing that job to return inflation to 1 to 3 percent. Fiscal policy will work alongside that, but we will always seek to look after the lowest income New Zealanders.

Well, there’s a bit that’s come up in the debate already, but I am very impressed with the Minister of Finance’s ability to bluff it out brazenly. Some of his comments—particularly, I just want to return to the comment about how the quality of spend has been so fantastic and delivered so much. I just think to myself—you know, I’m sitting here listening to him: “$5 billion extra in education”, and what have we got out of that? Well, half our kids are not going to school, and, of course, the exam results that they’re delivering—well, let’s not go there. I’m sure that the standard of education wasn’t as good as when the Minister was at school.

Then I think about the health spending, and, of course, billions have gone into that. And, of course, we’ve got 80,000 extra people on the waiting lists. We’ve got the ticking time bomb of many people who do not know that they’ve got illnesses—particularly women—and all those sort of things, and yet the Minister just said before how much more was being delivered for New Zealanders. I’d think that is a long-running dispute, because many New Zealanders are not seeing that.

The second thing: I just want to get back to the earlier debate, and the Minister is very good at using monetary values and percentages when he’s ready to use them. Of course, in terms of spending, which is, of course, what we’re talking about here, core Crown expenses are projected to increase in monetary value. They will go from $126 billion to about $150 billion over the next five, six years. Of course, from a percentage term, it looks like there’s a decrease. And, of course, we all know what that’s about, and that’s not because Government expenditure is decreasing; it is increasing in monetary value. If I said to Mr Robertson, “Would you like $125 billion to spend or would you like $150 billion to spend?”, I know what the answer would be for Mr Robertson.

But what is happening, partly through inflation, of course—because that’s what’s driving a lot of this issue—is that the economy grows and the GDP is growing—some of it counter to all the efforts of the Government to try and stilt that with small businesses, because they’ve thrust so much additional costs on them. So I just want to make that point. But the Government spend is still increasing in monetary terms.

The exact quote, or one of the quotes, from Adrian Orr, the Reserve Bank Governor, which is, actually, just slightly different from what the Minister said before, is “Reprioritisation of current spending and revenue arising through other alternatives makes the job of monetary policy easier”—i.e., for the Reserve Bank—“because it is redirecting current income rather than creating new cash in the economy.” Read into that last bit: creating inflation. And, of course, Mr Adrian Orr was quite clear in at least two of the hearings before the Finance and Expenditure Committee that fiscal policy—i.e., the policy run by the Minister of Finance—was contributing significantly to his job of taming inflation; that is why we’ve got such rapid rises on inflation.

Need I remind you that only in 2021 the official cash rate was at 0.25 percent and here we are at 4.75 percent and highly likely to be at 5 percent tomorrow. For every percent increase in debt—and the average value of New Zealand debt is about $487,000 per house—that equates to $5,000, or over that period roughly $20,000 of additional spending—so that’s $30,000 pre-tax—that households have got to find to pay their debt, pay their interest on their mortgages.

Of course, I now turn to the Mind Your Own Business summary that came out yesterday. What we’re seeing now is the dangerous impact on both households and on small businesses. And just for Chlöe Swarbrick’s benefit, financial hardship is now up 60 percent for people making house loan repayments—that’s part of it—but for small businesses we have now got 30 percent of businesses who have got less than six months, if current interest rates stay where they are. And, actually, one in five—19 percent—businesses are saying if the interest rates continue to go up, they will need to close their business. That is a result of that Minister, the Minister of Finance.

It would be remiss of me, given that the Minister raised the topic of students, to not put this to him. So does the Minister then agree with this quote from former Otago University Students’ Association president, who then went on to become president of the New Zealand Union of Students’ Associations (NZUSA) in 1996—of course, named Grant Robertson—who said, and I quote, “Only 37 percent of full-time students get any kind of allowance. The main culprit here is the National Government’s absurd means-testing programme.”? And, if he does, then is he not blown away by the fact that while he—or, the president of NZUSA—back in 1996 was frustrated at only 37 percent of students getting access to the student allowance, it’s now even fewer at just 27 percent, and, in fact, his majority Government keeps in place that exact same means-testing rule that he was frustrated about over 10, 20 years ago?

It’s a lot more than 20 years ago, I can tell the member! Look, that idealistic, better-looking man back in 1996 certainly was making some interesting and quite good points. Look, in all seriousness, I do think that over the course of the time that we’ve been in Government, we have attempted to improve significantly the lot of tertiary students. In particular, if I even go back a little further to the time between when those comments were made and now, we have got significant resources invested in things like the interest-free student loan programme and making sure that we do support students through a number of different means. But, in the end, when it came to this particular term of Government, we prioritised not only keeping our fees-free programme—which, of course, also didn’t exist in those days—but actually re-orientating some of the expenditure that would have been spent more in that area, around apprenticeships.

I stand by that decision, because I think what the 1996 version of me perhaps didn’t have in my head was the importance of us investing across the whole trade training space, as well as within universities and other degree programme providers—we’ve got to get that balance right. We’ve put a significant amount of resources into supporting apprenticeships: we’ve got over 200,000 people who have benefitted from either free trade training or free apprenticeships, so we have redirected some of that money. We continue to look for ways that we can support students, most recently with the increases on 1 April to loan and living cost requirements, and we will keep continuing to do that as resources allow.

Tēnā koe, Madam Chair. I just had a few questions for the Minister, particularly focused on infrastructure spending priorities. Now that a much greater share of transport infrastructure is being funded by Crown funding and not the National Land Transport Fund, I would expect the Minister of Finance to have even more an interest in the economic case for infrastructure investments.

We’ve seen a number of projects that have been announced or are being worked on by the Government, like projects in the New Zealand Upgrade Programme, totally Crown funded; the Let’s Get Wellington Moving programme options and preferred options; and now Auckland harbour crossing and Auckland Light Rail.

In many of these cases, where there are public benefit-cost ratios, which represent the ratio between the overall expected wider socio-economic benefits of the project and the costs, many of them fall to well below 1. At the same time, we’ve seen the Government has received a business case for the Lower North Island regional trains, which has a benefit-cost ratio of over 1. They’re requesting, most recently, $350 million—I accept that might have increased a bit—but it’s a very small amount of money compared to what’s being spent on projects in the New Zealand Upgrade Programme or that is proposed for some of these larger programmes in Auckland and Wellington.

I’m just wondering, is the Government committed to investing in projects that have a good return on investment, and will the Government be resourcing the Infrastructure Commission to do the work on an infrastructure priorities list that could help improve the business case process, the optioneering process, and maybe improve the overall public debate on where we should be spending money in order to make it easier for people and goods to move around the country at lower cost but also at lower carbon cost?

I thank the member very much for her question and acknowledge the work that she’s done in this area, both before coming into Parliament and in Parliament.

It is an area where I think—the phrase you used around “business case” has triggered me, because it is one of the areas where I think we can do much better. I think that’s probably acknowledged across the infrastructure system as well that in an effort to make sure that we are considering options, we are considering all costs, lifetime costs, and that we are making sure that we are driving value for money. I suspect we’ve overburdened the system when it comes to business cases. So that is an issue that I share with the member as something that I think we can do a bit better on. We still need to make sure that we go through the proper analysis, we consider the options, but I think that there are ways that we could do that better. I know that Te Waihanga, the Infrastructure Commission, does also consider those matters as well.

In answer to the question she raised about the priority list, yes. The Infrastructure Commission, having produced what I regard as a very good document, the infrastructure strategy, they have a Government response to that. Part of that then flows on to how we get a priorities list. It will be extremely hard, but something that I would like to think we could do, and that that could have a level support across Parliament and across our society so that we all understand where we’re going.

What I can say to the member is that the infrastructure strategy highlights very much the issues that she raises around carbon emissions and around the importance of the infrastructure projects that we now do, understanding their impact on emissions and being able to do them in a way that helps reduce emissions for us.

The member raised the specific issue about benefit-cost ratios (BCRs) and the harbour crossing. When I was answering on behalf of the Minister of Transport to her the other day, one thing I didn’t quite get to say was the fact that obviously, when we’re looking at BCRs for the options there, we’re working on ones that were from last year rather than ones from this year. I guess that points to the fact that BCRs can change as a process goes forward and goes through.

In terms of the broader comments that the member is making, I support the fact that our infrastructure needs to be efficient and effective, but also, at the same time, support our emissions reductions goals. We’ve invested significantly as a Government in public transport and in rail, and we will continue to do so.

I was particularly struck by the comment from the Minister of Finance in which he held up the COVID-19 Response and Recovery Fund as an example of the transparency in the way the Government spends. The Minister of Finance will acknowledge that he raided that fund for the purpose of consultants to work on three waters reform. The gap between spending money to help people through a health crisis and paying people from consultancy firms to tell the Government how to reform the governance of three waters assets could not be wider. So if that’s the Minister of Finance’s example of transparent reporting, I suggest he find a better one, because the facts are stark.

Government spending in the year we are reviewing was the highest as a proportion of GDP as it has been in at least 17 years; more in the last year than during the other COVID19 lockdown years. The question that we have asked on this side of the House is: where is the value for that spending? Because let’s think back to 2017, when Crown spending was 27.7 percent of GDP. It’s now 35 percent. In that year, the State house waiting list was at least a quarter of what it is today. There were not thousands of children sleeping in motel rooms. In fact, the health waiting lists were shorter. Here in Wellington today, if you want to go to the emergency department, well, good luck, because around two out of five times, you’ll be waiting more than six hours for care.

So my question to the Minister of Finance is this: what good is the wellbeing framework and the pages and pages of faff about how nice the intentions are, and how hard everyone’s trying, and how we’ve all wrung our hands and said we cared about it, if the result is that you’re spending so much money that we have a higher inflation rate than Australia, the US, other countries around the world that we like to compare ourselves to; that our cost of living is completely out of control; interest rates have spiked higher faster than at any point in the history of the official cash rate; and we’re not seeing the social results for it. The Minister has poured billions into Kāinga Ora, yet the State house waiting list is the longest it’s ever been in New Zealand’s history. We have literally thousands of kids in motel rooms. The hospital system is, in the words of the man who used to be in charge of it until very recently, “in crisis”. Our educational achievement has declined in real terms. Yet the Minister of Finance says, “Trust me. Look how transparent the COVID fund was. Look how well we did with all of those billions. And I’ve got a wellbeing report. So, look, it’s all going to be fine.”

Well, my question to the Minister of Finance is pretty simple: why should New Zealanders trust you to spend more of their hard-earned money, with the tax you take from them, when you have failed to date to provide the results they have a right to expect for it?

Madam Chair, thank you. Perhaps a history lesson might be helpful at this moment—in response to the member’s question—covering the period which we are assessing through these statements, and trying to answer the member’s question around the influence of Government spending on inflation. On 6 October 2021—in the period in which we are covering here—the Reserve Bank raised the official cash rate (OCR). On 21 October that year, the National Party called for a multibillion-dollar stimulus package of tax cuts and more spending, including increasing the wage subsidy, which would have cost $70-80 million a week; continuing the wage subsidy further, which would have cost another $70-80 million a week; implementing rental support for small businesses, which would have cost $100-180 million a week; and extending the loss carry back by $100 million per year.

💬 Nicola Willis: What’s this got to do with your financial accounts?

What this has got to do with it is that the question that the member asked me was about the role of one of them—her question was about the role of Government spending in increasing inflation. The point I’m making to the member is that had we followed her prescription in the period that was being covered—

💬 Nicola Willis: It wasn’t my prescription.

The member says it wasn’t her prescription. Well, it was certainly the National Party’s prescription. In the period that the member is concerned about, they were looking for a multibillion-dollar stimulus package of tax cuts and spending.

So if the member thinks that it’s Government spending that increases inflation, imagine what would have happened if we had followed on from the member. I might say that the National Party carried that on—after the November OCR increase, Christopher Luxon called for more stimulus. After the February 2022 OCR increase—also covered in this period that we’re looking at here—the Reserve Bank raised the OCR for the third time. And National’s response? An $11 billion tax cut policy that would have exacerbated inflation even more.

💬 Nicola Willis: Point of order, Madam Chair. Look, the Minister of Finance has used his floor in the House to misrepresent National’s position in tax policy. The number he has used to characterise our tax policy is, I think, false. I don’t want to accuse him of misleading the committee wilfully, but I do want to give him the opportunity to withdraw that characterisation.

Madam Chair, am I back on? No, it was an $11 billion tax cut policy announced on 6 March 2022. It included increasing tax thresholds by 11.5 percent; removing the 39 percent tax rate—the top tax rate; restoring the property investor interest deductions; repealing loss ring-fencing and returning the brightline test to two years: $11 billion estimated at the time.

💬 Nicola Willis: Ring-fencing is not even in our policy.

But it was; it was in the policy that you announced on 6 March 2022. Anyway, regardless of whether we want to debate whether it was $11 billion or $10 billion or $9 billion, the point is that the kinds of things the member has been proposing would have exacerbated inflation even more than the necessary spending that we had to do when it came to COVID.

I am proud of the Government’s record in this regard. I think that the Government has done as good a job as almost any other Government around the world in the face of COVID. The member might like to join Mr Seymour in the pursuit of a PhD in “Hindsight Economics”. That is not actually what it means when you have to govern. When you have to govern, you have to govern in the here and now.

Sometimes, we don’t get every decision right. But overall, what the Government did during that period, I believe, was invest to support New Zealanders to stay in jobs, to support New Zealanders to say well and healthy. When I look at that, and compare that to the rest of the world, I believe that we have a record that we can be proud of.

I move, That the committee report progress on this bill.

💬 Hon Members: Madam Chair? Madam Chair?

If I could just explain, the Business Committee has already made a ruling that the time for this debate is only one hour. That one hour is now over at 4.23.

I will report progress on this bill, but if I can also say that the decision to have just one hour was made in the Business Committee, which all parties agreed to, so it was a bit unnecessary to take a vote on this.

Progress to be reported.

House resumed.

Mr Speaker, the committee has considered the Appropriation (2021/22 Confirmation and Validation) Bill, and reports progress. I move, That the report be adopted.

Motion agreed to.

Report adopted.